FDIC Law, Regulations, Related Acts

4000 - Advisory Opinions

Maximum Insurance Coverage for Public Deposits

FDIC-85-16

July 17, 1985

Walter P. Doyle, Counsel

Thank you for your June 25 letter inquiring about the apparent
conflict between section 11(a)(2)(A) of our Act, which states that
deposits of public funds "shall be insured in an amount not to
exceed $100,000 per account," and § 330.8 of FDIC
regulations, which limits the coverage of public deposits held in the
same right and capacity to $100,000 in the aggregate per insured bank.
(Emphasis added.)

Section 11(a)(2) was added to our Act in 1974 by Public Law 93-495.
The House-passed version of this legislation provided for 100 per cent
insurance of public unit deposits, whereas the Senate bill had no
provision on this point. The language eventually enacted came out of
the Conference Committee with little legislative history to clarify
Congressional intent.

If the "per account" language were taken to mean that the
simple proliferation of multiple accounts in the same insured bank by
the same official custodian of the same public unit could achieve
unlimited insurance coverage, then, of course, the House's preference
for 100 per cent insurance of public deposits would, in effect, be the
result and the Conference Committee compromise and much of the
resulting verbiage in section 11(a)(2)(A) and in other parts of our Act
would be essentially meaningless.

On the other hand, with a closer look at the above-quoted language
in section 11(a)(2)(A), one will note that the statement is that public
deposits "shall be insured in an amount not to exceed
$100,000 per account." (Emphasis added.) Taking this in
conjunction with the very broad regulatory authority in section 3(m)(1)
of our Act for FDIC "to define, with such classifications and
exceptions as it may prescribe, [the term "insured deposit" as
well as the terms used in section 11(a)] and the extent of the
insurance coverage resulting therefrom," it seems clear that the
interpretation of section 11(a)(2)(A) as embodied in § 330.8 of our
regulations is the one which most accurately reflects the underlying
Congressional intent of the 1974 legislation in the context of the
overall statutory framework in which FDIC operates.

For your further information, I am enclosing a copy of a recent FDIC
legal opinion pertaining to the use of multiple accounts in an effort
to achieve increased insurance coverage. Please let us know if we can
be of any further assistance.